In case a so called 403 statement has been issued by the parent company, a settlement reached by a creditor with a subsidiary does not automatically entail that the creditor concerned has relinquished its claim against the parent company. The Supreme Court recently ruled that, as a consequence of joint and several liability assumed under the 403 statement by the parent company, independent fulfilment of a contract may be claimed against it.
Companies frequently apply the group exemption pursuant to Section 2:403 Civil Code when filing their financial statements. This exemption entails that, subject to certain conditions, a subsidiary is not required to prepare and publish full financial statements. In such cases, the financial information regarding the subsidiary must be incorporated in the parent company’s consolidated financial statements. In addition, the parent company is required to assume joint and several liability for debts resulting from legal acts by its subsidiary. This so-called 403 statement must be filed with the Chamber of Commerce.
The case at hand is the following. Parent company Bia Beheer submitted a 403 statement with regard to its subsidiary Mastertools. Mastertools had committed itself to deliver to Lentink Metaalwarenfabriek a ‘trekstempel’ (moulding device). Because the device did not meet the requirements, Lentink terminated the contract and wished to recover the part of the purchase price it had already paid. In addition, the company held Mastertools liable for the damage suffered.
In 2007, both Mastertools and Bia Beheer were declared bankrupt, and two separate administrators were appointed for the companies. Ultimately, Lentink Metaalwarenfabriek reached a settlement with the administrator for Mastertools, according to which Mastertools paid Lentink the sum of EUR 25,000 and parties granted each other full discharge.
Lentink subsequently approached Bia Beheer’s administrator with regard to the remainder of its claim, based on the 403 statement filed by Bia Beheer. Bia’s administrator took the view that recourse against Bia Beheer on the basis of the 403 statement was no longer open because Lentink Metaalwarenfabriek and Mastertools had negotiated a settlement, as a result of which Mastertools no longer had an obligation towards Lentink Metaalwarenfabriek.
However, the Supreme Court held that the 403 statement entails that Bia Beheer assumed joint and several liability for debts resulting from Mastertools’ legal acts. This joint and several liability on the part of Bia Beheer entails liability based on an independent contract with Lentink Metaalwarenfabriek, regarding which independent fulfilment can be claimed. As the settlement reached by Lentink Metaalwarenfabriek and Mastertools did not involve the former waiving its claim against Bia Beheer, it resulted only in a reduction of Bia Beheer’s claim by the amount of EUR 25,000 paid by the administrator. For the remainder, Bia Beheer’s liability towards Lentink Metaalwarenfabriek remains in place.
The conclusion of this ruling is, that a parent company can be held directly and jointly and severally liable on the basis of a 403 statement filed. If, in the context of the resolution of a debt situation, a settlement is reached with a subsidiary, it is therefore important that the parent company also be granted discharge.